Market Overview: Silver is seeing a little selling in early action today while gold has rebounded into positive territory. Seeing some profit taking should come as no surprise following recent strong gains in both gold and silver. Recent weaker than expected economic data has fueled some buying in precious metals, as expectations for a September interest rate hike by the Fed have declined. Investors will continue to monitor the data stream the rest of the week, and will now look forward to tomorrow’s ECB meeting.
Key Data Points: MBA Mortgage Applications this morning showed a rise of one percent for the week of September 2nd, with the year over year rate rising to seven percent. While activity is not exactly overheating, low mortgage rates are encouraging buyers and also fueling refinancing activity.
The PMI Services Index is also set for release this morning, and consensus estimates are looking for a reading of 51.2. Such a reading is not far above the breakeven level of 50, and could potentially point to ongoing sluggishness in the sector.
The Fed Beige Book will also be released later today and may garner extra scrutiny following some recent weaker than expected data. In fact, this report could be very important as any weakness could shift interest rate expectations even further.
The ECB will be meeting tomorrow and while it is believed that the central bank will not make any significant moves tomorrow regarding policy, the bank will issue fresh economic forecasts and assessments that could potentially fuel movement in currency and interest rate markets.
Outside Markets: Stocks are trading flat today as investors await for more fresh inputs. Crude oil is slightly higher while interest rates are declining. The dollar index is trading just above the flat line and could potentially come under further pressure if more weak economic data is seen. Dollar weakness yesterday was likely a major force behind gold and silver’s strong showing.
The Big Picture: From a technical perspective, gold and silver look quite positive following recent gains. Markets may be vulnerable to volatility, however, based on changing interest rate expectations. For now, gold and silver may potentially see further buying interest that could be exacerbated if more economic weakness is seen. In addition, further stimulus measures seen elsewhere may also be supportive of gold and silver. Stocks remain not far from recent highs, and while the path of least resistance in stocks is still higher, any signs of significant weakness could also potentially fuel buying interest in silver, gold and other perceived safe haven assets.